As a second Trump Administration prepares to take office in January 2024, the future of the American steel industry remains murky. President Trump has claimed that he wants to increase steel production in the United States, yet, in the lead up to the election, he pledged to kill a deal that would result in a $15 billion injection of investment into U.S. Steel by Nippon Steel, simply because Nippon Steel is a Japanese company.
An unprecedented investment into American steelmaking should be celebrated, especially by politicians who have pledged to revive a floundering industry. The current trajectory for U.S. Steel is trending downwards. In 2021, it canceled plans to modernize its integrated Mon Valley Works in western Pennsylvania and discontinued production of raw steel at its Great Lakes Works near Detroit. Nippon Steel’s investment would reinvigorate important blast-furnace facilities and get these U.S. manufacturing operations back on their feet.
This should be a run-of-the-mill transaction. During my years in trade enforcement, most recently as Chairman of the International Trade Commission, the industry has seen foreign and domestic producers expand in other markets through international mergers, acquisitions, and corporate restructurings. Cross-border transactions are a regular feature of the steel industry. For example, U.S. Steel itself controls integrated mill operations in Slovakia, while Nucor has facilities in Trinidad and Tobago. ArcelorMittal sold its U.S. arm to Cleveland-Cliffs, and Cleveland-Cliffs’ acquired Canadian steel company Stelco. Foreign ownership of U.S. steel companies has not prevented American steelmakers from rigorously pursuing trade actions against imported steel products.
Yet Nippon Steel’s planned acquisition of U.S. Steel has drawn fiery political criticism. Confoundingly, this investment is being mischaracterized as a threat to national security that the Committee on Foreign Investment in the United States (CFIUS) should block, even though Japan is one of America’s staunchest allies. Moreover, certain politicians and the United Steel Workers (USW) have inexplicably alleged that foreign investment in American steel capabilities would cause U.S. Steel to stop using U.S. trade laws to prevent cheap imports from harming American workers. These charges do not hold up when considering the law and the American steel industry’s critical need for investment.
Importantly, most of the arguments that focus on Nippon Steel’s imports (rather than the massive investment it has offered) rest on wholly inaccurate assumptions. First, steelmakers with foreign parent companies benefit from the robust incentives offered by the federal government for producing in the United States, including government procurement and domestic content requirements. These companies also take advantage of the wide range of protections offered under U.S. law to reduce competition from imports, such as antidumping and countervailing duties, Section 232 duties, and other trade measures. They routinely bring trade remedy cases to impose duties on imports.
In fact, in an ongoing antidumping and countervailing duty investigation into corrosion-resistant steel from ten countries, one of Nippon Steel’s American subsidiaries is a petitioner requesting that the U.S. government impose duties on steel imports into the United States. Following Nippon Steel’s acquisition of U. S. Steel, Nippon Steel would have every incentive to protect U.S. Steel’s domestic production—Nippon Steel’s own investment—from foreign competition.
Second, Nippon Steel cannot, under U.S. law, use its acquisition of U.S. Steel to terminate existing trade measures or block future trade measures on imports from Japan. U.S. trade laws have provisions preventing U.S. manufacturers from blocking trade remedy actions against countries where they have affiliates. Nippon Steel could not skirt duty requirements for its Japanese steel imports through its ownership of U. S. Steel.
Finally, it belies common sense that Nippon Steel would invest nearly $15 billion in the United States and still rely on its own Japanese imports, importing from 6,000 miles away, rather than making products in the United States to serve local customers. Nippon Steel has every incentive to use American workers to produce high quality steel behind U.S. tariff walls.
If we want to strengthen domestic steel supply chains deemed critical for national security, the American steel industry needs investment like what Nippon Steel has promised. In addition to the $15 billion acquisition, Nippon Steel has committed to an almost $3 billion capital infusion to reinvigorate U.S. Steel, including the transfer of its renowned cutting-edge technology. Nippon Steel has also made unprecedented commitments not to lay off workers as a result of the transaction and, of course, not to interfere with U.S. Steel’s decisions to pursue U.S. trade actions.
Nothing in this deal makes us vulnerable to cheap imports. U.S. Steel has struggled to supply steel at the quantity and quality needed for American industrial consumers in the automotive, transportation and other sectors. A $15 billion capital infusion from a U.S. ally will reinvigorate a domestic manufacturing industry deemed to be of national security significance by both recent presidents.
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